Response from Nils Bernstein to questions about whether Denmark's monetary policy has changed

Question: "The aim of monetary and foreign-exchange policy is to keep the krone stable vis-à-vis the euro. Thursday, Danmarks Nationalbank chose to raise the rate of interest on certificates of deposit, even though the krone has been stable for some time and remains strong relative to the central parity of 7.46038. Why was the interest rate raised?

If it was raised because of developments in interest rates at the short end of the money market, the change did not take place with the krone in mind. Does this mean that Danmarks Nationalbank has changed its monetary policy?

What is most important in relation to the monetary policy pursued: the exchange rate of the krone or interest rates at the short end of the money market?"

Answer from Governor Nils Bernstein: "The Danish interest rate was raised because short-term market rates in the euro area have risen. The interest-rate spread has an impact on the exchange rate, and it is a standard procedure under the fixed-exchange-rate policy to follow the European interest rates. So the rate of interest was changed with the krone rate in mind; the fixed-exchange-rate policy has not changed."


Question: "In Thursday's press release you state that the interest rate increase is due to a rise in the short-term European market rates compared to the equivalent Danish market rates. Which spread are you referring to?"

Answer from Nils Bernstein: "We consider the overall picture."


Question: "Is Danmarks Nationalbank prepared to let the foreign-exchange reserve decline to a historically more natural level?"

Answer from Nils Bernstein: "We have no explicit target for the foreign-exchange reserve. It is a consequence of the fixed-exchange-rate policy."


Question: "Does Danmarks Nationalbank aim to keep the krone below the central rate of 7.46038 or is it ok – in view of the large foreign-exchange reserve – to let the krone trade symmetrically around the central parity?"

Answer from Nils Bernstein: "Since 1997 we have stabilised the krone at a rate close to the central rate. We still do that."